Press Release No. 10/280

Press Release: IMF Completes Fourth Review Under Stand-By Arrangement with Romania and Approves US$1.146 Billion Disbursement

July 2, 2010

The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of Romania’s economic performance under a program supported by a 24-month Stand-By Arrangement (SBA). The completion of the review enables the immediate disbursement of SDR 768 million (about €913.2 million or about US$1.1146 billion), bringing total disbursements under the program to SDR 9.031 billion (about €10,738.8 million or about US$13.475 billion). In completing the review the Executive Board also approved Romania’s request for a waiver of applicability of end-June 2010 performance criteria.

The SBA was approved on May 4, 2009 (Press Release No 09/148) in the amount of SDR 11.443 billion (about €13.607 billion or about US$17.074 billion). The arrangement entails exceptional access to IMF resources, amounting to 1,111 percent of Romania’s quota.

Following the Executive Board's discussion on Romania, Mr. John Lipsky, First Deputy Managing Director and Acting Chair, stated:

“Against the background of the large downturn, the Romanian authorities have made significant strides toward restoring macroeconomic stability and achieving an orderly adjustment of pre-crisis imbalances. They are taking ambitious adjustment measures to contain the weakening of the fiscal position and set the stage for a sustained improvement in public finances. Balancing the fiscal adjustment between expenditure cuts and tax increases will help cushion its social impact, while at the same time reversing excessive past increases in public wages.

“The authorities are committed to the sustainability of this adjustment over the medium term by buttressing it with comprehensive structural fiscal reforms. They plan to complement the recent approval of the fiscal responsibility legislation with reforms of the pension and public wage systems, reductions in public sector employment, reforms of the healthcare system and local government finances, and efforts to boost tax collection.

“The authorities’ monetary and financial sector policies are appropriately prudent and proactive, helping preserve financial stability in the face of the global financial crisis. While there is some room for further monetary easing going forward, the authorities are exercising caution, which is warranted by the uncertainties related to the inflationary impact of the VAT increase and regional developments. They will continue their proactive approach toward banking supervision and regulation, and will remain vigilant in view of the unsettled regional situation and the accompanied uncertainties regarding the quality of the loan portfolio. ”